Vehicles that are far away from their reported location represent an unknown risk to insurers. For instance, if a car is underwritten based on its primary location being in Florida, but is actually being operated predominantly in Los Angeles, then the risk, and the premium, associated with the vehicle's insurance policy is inaccurate. In today's mobile society, it is not uncommon for such situations to occur. As an example, students routinely drive their vehicles when attending out-of-state colleges. As another example, consultants commonly drive their own vehicles when they are engaged in long-term assignments that are in another city.
However, the risk is not limited to the insurer alone, as not every state in the United States has the same minimum insurance requirements. As a result, it is possible for the owner of a vehicle to be underinsured if the vehicle's primary location is outside its designated rating area. Likewise, some states require a state-specific insurance policy if the vehicle is in the state for more than six months. Acquiring accurate and up to date vehicle location information has traditionally presented challenges to insurers, who typically have relied on policy owners to provide updated information. All too often, this information is acquired when the vehicle's policy is being renewed. More infrequently, vehicle location information is provided voluntarily by the policy owner.
One approach to acquiring information related to a vehicle's primary location is through the use of telematics, which broadly refers to the integrated use of telecommunications and informatics. The use of telematics has more recently been related to the integration of geographical positioning system (GPS) technology with computers and mobile communications technology in automotive navigation systems to monitor the location and movement of a vehicle. Another approach is to use information sources such as a state's Department of Motor Vehicles or a college's enrollment records to provide the basis for determining the location of an associated vehicle. For example, if a college student is listed as the primary driver for a vehicle, and the student is registered at an out-of-state university, or even one with a different ZIP code, then it can be assumed the vehicle is co-located with the student. Based on these information sources, the rating for the vehicle can be properly set. Additionally, a check can be made that the insurance for that vehicle is at or above the minimums for the state in which the vehicle is located. However, vehicle location information provided by telematics or the described information sources is not currently used to automatically verify a vehicle's primary location and associated rating area.